Aside from growing risks posed by the new COVID-19 outbreak which may hamper Thailand's economic recovery in 2021, another important factor that warrants attention is the rising fund raising cost in the Thai bond market early in the year. This situation is partly due to projections regarding the increasing volume of Thai government bonds and the rising US treasury bond yields influenced by political developments in the US, following Joe Biden assuming the US presidency and committing to the implementation of additional large stimulus packages.
The yields of Thai medium to long-term government bonds may gradually inch up consistent with the direction of foreign bond markets over the remainder of 2021 due to two major factors: 1) the possibility of rising US treasury bond yields in line with a larger than expected US federal budget deficit; and 2) the Thai government's needs to raise funds for financing its measures and projects to sustain Thailand's economic recovery, continuing from the preceding year.
Nonetheless, KResearch assessed that the high level of liquidity in the system will be sufficient in supporting efforts to raise funds of both the public and private sectors, with a combined amount of not less than THB 2 trillion in 2021. Additionally, the rising yields in the Thai bond market should be kept within a limited range given that the BOT's policy rate may be kept at a low level throughout 2021. Meanwhile, development in foreign bond markets, especially that of the US, may hinge on several variables, particularly each country's ability to keep its latest COVID-19 outbreak under control, progress made on COVID-19 vaccinations, and the overall trend of economic recovery.